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Big Muddy rancher
Rancher
Joined: 10 Feb 2005
Posts: 7272
Location: Big Muddy valley
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 Posted: Mon Oct 13, 2008 6:36 pm Post subject: |
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| bverellen wrote: |
What is meant by land being priced to it's productivity?
I've heard this mentioned before as to what ag land used to be worth before all the folks from the cities started driving up prices.
TIA
bart.
<///>< |
Productivity to me means that the land might someday pay for itself.
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rancherfred
Member
Joined: 03 Sep 2007
Posts: 71
Location: Western Nebraska
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| Posted: Mon Oct 13, 2008 9:22 pm Post subject: |
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| bverellen wrote: |
What is meant by land being priced to it's productivity?
I've heard this mentioned before as to what ag land used to be worth before all the folks from the cities started driving up prices.
TIA
bart.
<///>< |
The last pasture land sold in our local area for around $450/ac. Current cash rents for those doing it that way are $8-10/ac. At the $10 level it will take 45 years just for the land to return its principle. That is not counting any property taxes, maintenance costs or interest on the loan. Land priced like that will never, ever be able to return anything to the owner but the pride of ownership. The only thing that can justify that price is easy money or a tax write-off.
I figure, and others time line may vary some, that you ought to be able to at least break even by the ten year mark. If you can't do that then the investment is probably pretty poor. If my memory is correct you can double your money in 6 years at 5% interest.(Somebody correct me if I am wrong on that)
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Denny
Rancher
Joined: 10 Feb 2005
Posts: 2822
Location: Mn usa
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| Posted: Tue Oct 14, 2008 6:09 am Post subject: |
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| In this day and age if you have'nt inherited land you will be able to buy some but not every acre you need.Land in our county now will be taxed recreational if it is'nt actively used for agriculture.I lease alot of ground from people who bought it cheap and use it for hunting and weekend retreats to me it's a win/win.No matter what anyone thinks we don't truly own the land we just have the honor to be stewards of it for a short time.I hope it drop's in price it has shot up so fast that only the well to do can afford it and in my opinion thats not right,but money talks and we no the rest.
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Soapweed
Rancher
Joined: 11 Feb 2005
Posts: 6657
Location: northern Nebraska Sandhills
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| Posted: Tue Oct 14, 2008 6:23 am Post subject: |
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| rancherfred wrote: |
| bverellen wrote: |
What is meant by land being priced to it's productivity?
I've heard this mentioned before as to what ag land used to be worth before all the folks from the cities started driving up prices.
TIA
bart.
<///>< |
The last pasture land sold in our local area for around $450/ac. Current cash rents for those doing it that way are $8-10/ac. At the $10 level it will take 45 years just for the land to return its principle. That is not counting any property taxes, maintenance costs or interest on the loan. Land priced like that will never, ever be able to return anything to the owner but the pride of ownership. The only thing that can justify that price is easy money or a tax write-off.
I figure, and others time line may vary some, that you ought to be able to at least break even by the ten year mark. If you can't do that then the investment is probably pretty poor. If my memory is correct you can double your money in 6 years at 5% interest.(Somebody correct me if I am wrong on that) |
I think it is more like you can double your money in ten years at 7%, or double your money in seven years at 10%, with compounded interest.
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rancherfred
Member
Joined: 03 Sep 2007
Posts: 71
Location: Western Nebraska
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| Posted: Tue Oct 14, 2008 6:53 am Post subject: |
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| Thanks Soap, I couldn't remember which one it was. The point is still pertinent that land at those prices is a terrible investment.
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pknoeber
Member
Joined: 06 Apr 2005
Posts: 87
Location: SW KS
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| Posted: Wed Oct 15, 2008 9:21 am Post subject: |
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| Soapweed wrote: |
| rancherfred wrote: |
| bverellen wrote: |
What is meant by land being priced to it's productivity?
I've heard this mentioned before as to what ag land used to be worth before all the folks from the cities started driving up prices.
TIA
bart.
<///>< |
The last pasture land sold in our local area for around $450/ac. Current cash rents for those doing it that way are $8-10/ac. At the $10 level it will take 45 years just for the land to return its principle. That is not counting any property taxes, maintenance costs or interest on the loan. Land priced like that will never, ever be able to return anything to the owner but the pride of ownership. The only thing that can justify that price is easy money or a tax write-off.
I figure, and others time line may vary some, that you ought to be able to at least break even by the ten year mark. If you can't do that then the investment is probably pretty poor. If my memory is correct you can double your money in 6 years at 5% interest.(Somebody correct me if I am wrong on that) |
I think it is more like you can double your money in ten years at 7%, or double your money in seven years at 10%, with compounded interest. |
It's the rule of 72. Take 72 divided by the return and that gives you the number of years (approximately) that it will take to double the investment.
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